I am the author of several books on technology and innovation. My new book, "Big Bang Disruption," co-authored with Paul F. Nunes, is now available. My earlier books include the New York Times best-seller, “Unleashing the Killer App" and "The Laws of Disruption."

Lessons From Uber: Why Innovation And Regulation Don't Mix

At the end of a long trip last week, I took a taxi from a BART mass transit station in San Francisco’s East Bay back to my house a few miles away.

As the law requires, I could only choose the first cab in line at the taxi stand, which was filthy. The driver begrudgingly popped the trunk, which was full of garbage, so I could stow my own suitcase inside. Throughout the ride, the driver never stopped talking on a headset connected to his cell phone, blasting the radio in the back seat so I couldn’t overhear his private conversation.

The driver had no idea where he was going, even though we weren’t leaving the city in which he picked me up, and asked repeatedly for me to tell him how to get there, directions he ignored, nearly missing every turn. He said nothing when I paid him, and sped off before I’d made it to the curb.

The sad truth is that there’s nothing even slightly unusual about that experience, and certainly no point to complaining to the cab company or any regulator. I got to my destination, I was charged what the meter said, and no one was killed. In regulated industries, that constitutes success.

So it’s no wonder that in the bizarro world of licensed taxicabs and limousines, incumbents faced with the sudden arrival of disruptive technologies that could vastly improve their quality, efficiency and profitability but which also introduce new competitors and new supply chain partners, respond as if their very existence is threatened. It is, of course.

Uber, which launched in 2009, allows users to arrange for limousines and, in some cities, taxicabs, using a smartphone app. Uber doesn’t provide its own vehicles or operators, but works with existing licensed drivers to help keep already-rolling vehicles busy transporting customers. Riders can track the location of their dispatched drivers using GPS, and pay directly on their phones. They can also rate the drivers.

These are all by now standard uses of off-the-shelf mobile technology. There’s nothing especially novel, or proprietary, about the platform Uber has built. Nothing, in any case, that couldn’t or shouldn’t have already been implemented by existing taxi and limo services.

Instead of responding to a new kind of virtual competitor with better products and services, however, the highly-regulated taxi and limousine companies in every city Uber has entered have instead gone the route of trying to ban Uber’s existence.

They’ve called on state and local regulators to declare the service in violation of decades-old laws outlawing unlicensed ride services, often based on technical definitions of “meters,” “dispatch,” and “taxi.”

At the annual meeting in Washington last month of the Congressional Internet Caucus, House Judiciary Committee Chairman Bob Goodlatte (R-Va.), who had just taken his first ride using Uber, interviewed company CEO Travis Kalanick on the regulatory barriers the company and other technology-enabled ride services face.

In some cities, Kalanick told the Congressman, pitting the regulators against the new services has worked, at least so far.

Uber can’t operate in Miami, for example, where existing laws were clearly drafted to protect taxicabs from competition even from other licensed services. Limousines are prohibited from picking up passengers less than an hour after receiving a reservation, for example, and the minimum fare by law is $80. The number of limousine licenses has long been limited to five hundred and fifty.

Indeed, according to Kalanick, the company has spent much of its young life fighting in courts, public utility commissions, and city councils for the ability to offer any service at all. Uber has already fought charges, fines and bans in San Francisco, Chicago, Massachusetts, New York, Washington D.C, and recently in Toronto, where city officials have charged the company with dispatching rides without a license.

In D.C. and San Francisco, however, Uber has successfully fought back, scoring dramatic reversals. Regulatory bans and stiff penalties have transformed into promises to liberalize if not to rethink entirely the rationale behind tightly-regulating paid ride services. The D.C. city council, for example, suddenly reversed an outright ban on the service, creating in December a new class of digitally-dispatched rides.

And in California last month, the state Public Utility Commission entered into an agreement with Uber that allows it to continue operating while a rulemaking is pending to revise existing regulations.

The PUC is also considering changes that would allow Uber and other mobile app-based services, such as Lyft and Sidecar, to facilitate consumer-to-consumer ride-sharing. Such services are part of a growing new sharing economy in which ordinary people can make money using their personal assets to offer everything from sleeping space (e.g,, Airbnb) to parking to pet boarding and handyman services.

These new companies are already causing disruption to long-mature supply chains. Avis recently paid $500 million for car-sharing service Zipcar, largely for access to its network of nearly 1 million members.

Oil and Water: Innovation and Regulation

From an economic standpoint, virtual asset managers and sharing services take advantage of ubiquitous mobile devices and increasingly high-speed broadband networks to maximize the use of skills and property that otherwise lies fallow.

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Uncouple regulations from the public conveyance of human beings. What could possible go wrong? Look at this Lyft amateur in San Francisco: http://bit.ly/WVXmIy

There were mobile apps for cabs before the fake cab companies started using them. These regulations are related to safety. Technology doesn’t make cab-riding any safer, so it’s an unrelated issue. Anyway people are still using a phone to get a cab–just like a hundred years ago.

You guys are so drunk on the Kool-Aid you’re starting to lose your minds.

I’ll let these similar-sounding “defenses” of the regulated taxicab and limousine industry speak for themselves. But apparently one of the many technologies the Taxicab, Limousine and Paratransit Association (http://www.tlpa.org/) doesn’t know about is fixed IP addresses, which immediately identify the Association as the source of traffic to the article without any need for forensics.

Here’s a hint about industries in the midst of de-maturation: when you have to resort to referring to the disruptors as “fake” and “rogue” and accusing anyone who’s interested in novel applications as having “Drunk the Kool-Aid”, you’re nearing the end of the productive use of rent-seeking behavior.

Drinking the Kool-Aid of deregulation, especially in the arena of public safety, is anything but “productive.” Would you fly in an unregulated airplane? Uh, no. Yet statistically, you’re much more likely to die in a car crash.

If you are injured in an Uber or Lyft car, who do you go to? The law, right? The gummint you hold in contempt. And if these companies go under before you’re settled, then what?

Did you know that Lyft will not show proof of its much-vaunted million-dollar insurance to its own drivers? And that a driver was fired for pushing the issue? Yeah, I’d feel really safe sitting in an untested, 12-year-old car driven by an inexperienced driver.

I’ve seen Lyft cars with out-of-state plates. I saw a Lyft car with NO plates. I defy you to tell me that those are real, genuine, un-fake taxicabs.

Larry, In case you don’t know, our association, (TLPA), does have members around the world. We do subscribe to something called a “clipping service”. Since we are businessmen and women, we rely on this service to guide us to the most relevant articles. These comments may appear to be from a Fixed IP address but I can assure you that besides having static IP address for our routers, (TCPIP), we are in several different areas of the country.

Among the facts that we have provided to you, those that you failed to recognize in your article, you fail to mention that the taxicab industry is not completely broken. I am sure that you have experienced a pleasant cab ride at some point in your life. Actually, I am surprised that you did not use Uber from the Bart station…? Why is that?

Uber continues to operate in total disregard for current laws. It steals fares from cabbies, (some good and some not so good). These hard working individuals make a living working long hours most every day. The malice that Travis displays for these hard working individuals is despicable! Any non-”Kool-aid” drinking journalist would recognize and report this as part of the Uber story.

We have seen taxicab drivers that have lost their ability to drive a cab due to bad driving records or failed drug tests, begin their new career as a sedan/limo company. Kind of ironic, huh?

No, we are not “Tech” companies with free lunches for all and millions of dollars in venture capital. But that does not mean that we are ignorant. We know the benefits of Tech in transportation and we will not go quietly when we read less-than-half-truth articles like yours.

Sorry, I am flagging the meter. Please take your belongings and this ride is on me!

Mr. Silva of course did not deem it relevant to mention in his earlier comment his affiliation with the TLPA, but having been (easily) caught pumping negative comments to the Forbes website, he now acknowledges that the similar-sounding replies that all began appearing almost simultaneously were in fact from TLPA members, none of whom identified themselves as such.

Both the organization’s technical naivete and preferred method of responding to new entrants speak for themselves.

I’m not sure what you mean by “worth mentioning,” but all East Bay cities have taxicab ordinances. The cab picked me up in Richmond, which regulates taxicabs under Section 7.68.170 of the Richmond Municipal Code. The California Public Utilities Commission also regulates taxis and limos everywhere in California, see http://www.cpuc.ca.gov/PUC/transportation/Passengers/. And BART regulates the taxi stands at BART stations.

Like I said, no taxi regulations worth mentioning. Richmond’s ordinance has no age limit on vehicles, no requirement to keep the vehicle clean, and a pathetically low insurance requirment. The ridiculous few pages of “regulation” in Richmond are there to meet a state requirment that each city have some kind of taxi regulations. Richmond’s are almost meaningless.

The California PUC delegates regulation of taxis to cities. The CPUC does not regulate taxis. BART’s regulation is a parking ordinance. That’s hardly a barrier to innovation.